Pakistan resumes talks with Etisalat over $800 million debt

Etisalat is reportedly in talks with the government of Pakistan over the $800 million debt it accrued buying a stake in the Pakistan Telecommunication Company

The Pakistan Muslim League (PML-N) government is in talks with Etisalat about the $800 million it owes the government since 2005.

The amount was accrued when Pakistani government loaned the UAE telco $800 million to buy the Pakistan Telecommunication Company Limited (PTCL), which at the time was going private.

According to The Express Tribune, the privatisation secretary, Irfan Ali is said to have confirmed that a group of representatives from Etisalat met with prime minister, Shahid Khaqan Abbasi while in Islamabad. It is Etisalat’s reported second visit to the country in a month.

Etisalat initially brought 26% shares in PTCL, including management control at a price of $2.6 billion. Etisalat then found out that the second lowest bid was in fact $1.4 billion at which point the company then tried to back out of the offer. Abdul Hafeez Shaikh, who was acting as privatisation minister at the time, then offered the company an offer of an initial payment of $1.4 billion with the remaining balance to be paid in nine instalments taking it to the 2010. In addition, Shaikh promised to transfer the properties owned by PTCL over to Etisalat.

Since then the Pakistani government served a shortfall notice to Etisalat in September 2015, informing the company that it could not transfer the remaining thirty-three properties as promised and that the company would have to pay the outstanding debt by adjusting the value of these properties.

Privatisation secretary, Ali said that according to the government’s assessment of the thirty-three properties, it was not valued at more than $88 million. Under the terms of the agreement, the final price of the properties will be highest value reached by any of the two parties.

“In our assessment there would not be a major difference between the valuation determined by Pakistan and Etisalat”, said minister of privatisation, Daniyal Aziz to The Express Tribune.

To date Etisalat has not acted on the issue but is now willing to consider the valuation clause, said the privatisation minister, adding that Etisalat would take between six to seven weeks to finalise its own valuation of the thirty-three outstanding properties.

“After all these years, we are now satisfied that the matter will be resolved soon”, said Aziz to The Express Tribune.

Three years ago, the acting privatisation commission chairman, Muhammad Zubair told the Public Accounts Committee that Etisalat did not share its valuation with the Pakistani governement but, according to sources, it was over $450 million.

As for the $800 million debt former finance minister, Ishaq Dar had excluded the $800 million in arrears from the privatisation of PTCL from the budget books for years, a fact that privatisation secretary Ali said is because of Etisalat’s exceptionally high bid for PTCL.

He added that Etisalat is making a few additional demands but the government is standing firm and has stated that only matters covered in the sales purchase agreement would be discussed during negotiations.

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